EP215: Long-Takes: What can E&Ps learn from US refiners amidst a Geopolitical Super Vol macro backdrop?

About this episode

The episode discusses energy equity valuations in the context of geopolitical uncertainty and commodity volatility, drawing parallels to past experiences with US refiners.

WATCH the video on Substack by clicking the play button above or on YouTube ( here ). STREAM audio only on Apple Podcasts ( here ), Spotify ( here ), or your favorite podcast player app. DOWNLOAD a pdf of a moderately edited transcript using the blue Download button below. There is no PowerPoint slide deck this week. This week we introduce the topic of how to think about energy equity valuations given a Geopolitical Super Vol macro backdrop. Traditional valuation metrics like EV/EBITDA are likely to prove especially unhelpful at a time of major geopolitical uncertainty and commodity volatility. We harken back to the framework we used in the early 2010s for US refiners when Brent-WTI first blew out to around $20/bbl when surging shale oil production unexpectedly filled up pipelines and infrastructure. At the time, investors treated every press release of a contemplated pipeline reversal as solving the bottleneck. Spreads did ultimately narrow meaningfully, as expected, but the transient “above normal” cash flows were not worth zero as the market was initially ascribing. Our framework gave “one-time” credit to temporary cash flows and full credit for our estimate of mid-cycle…

People in this episode

Host: Arjun Murti

Topics covered

• energy equity valuations
• geopolitical uncertainty
• commodity volatility
• valuation metrics
• cash flows
• pipeline reversals

Keywords

• energy equity
• geopolitical uncertainty
• commodity volatility
• valuation metrics
• cash flows
• pipeline reversals

Mentioned in this episode

Organizations: US refiners

Products: Brent-WTI, EV/EBITDA

Places: Strait of Hormuz, pipelines, infrastructure

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